LIVERPOOL council officials planned to sell off nine town houses in the city's historic Georgian quarter on a valuation which was almost two years out of date.

Further investigations are now to be held to discover if it was an isolated case or if dozens of other sell-offs have been based on similar errors.

If the deal had gone through, council tax payers would have lost up to £500,000 due to the substantial rises in property prices since 2002.

The Daily Post has obtained a confidential council report into the matter following an inquiry at senior level into what went wrong.

It criticises "basic judgement errors" by council officers in both Liverpool 20/20 - the company set up to handle property sales for the authority - and the Land and Property Services Department.

The report reveals a £700,000 valuation on the properties agreed by city officers in May had actually been completed in 2002.

The proposed sell-off of the properties to Cosmopolitan Housing Association was only stopped when a senior councillor challenged the low valuation made by officers.

The Daily Post revealed in June that the proposed sale of the houses - spilt into 27 flats - on the corner of Percy Street and Parliament Street near the Anglican Cathedral was being investigated by the District Valuer and an internal council audit team.

Cosmopolitan had offered the city council just £700,000 for the properties which it said it wanted to renovate.

But the Daily Post discovered the association's estate agency subsidiary, Homelife Estates, had already prepared a Particulars of Sale document in which investors were invited to offer more than £1.7m for the houses.

It gave Cosmopolitan an immediate potential profit of almost £1m.

Cosmopolitan has always denied any wrongdoing and said it was simply "testing the market".

The inquiry stops short of accusing Cosmopolitan of acting improperly but does criticise a lack of transparency about their intentions.

The report concludes: "Our overriding conclusion is that there is no evidence of Cosmopolitan having acted improperly in the sense of making false statements.

"However we do not feel they have been entirely forthcoming in their dealings, notably in not informing the council of their testing the market for possible sell-on or their current proposal for a joint venture." One worrying aspect of the report is an admission that the proposed deal with Cosmopolitan may not be the only such sale to have been based on mistaken valuations.

It states: "The question inevitable arises as to whether this is an isolated case, or whether it is symptomatic of wider weaknesses in the arrangements for property disposals."

In the light of the problems identified by the report, it recommends employing a new £60,000-a-year Land and Property Services Manager to provide new leadership in the department.

The District Valuer may also be asked to provide external quality and systems checks in the department.

Last night a council spokesman said: "This is a confidential council report and it would be inappropriate for us to comment further."

Geoff Redhead, the chief executive of Cosmopolitan, also declined to discuss the report in detail.

The District Valuer is also investigating a proposed £525,000 deal between the council and Cosmopolitan, this time for the sale of five Georgian town houses at 1-9 Parliament Place.